For more information on how retailers are using mixed commerce solutions, check out our Mixed Commerce Glossary, which defines the terminology being used by businesses to describe the changes currently sweeping retail. For a rundown of the biggest developments in Virtual Reality and Augmented Reality from the past 12 months, check out our 2016 roundup, Augmented Reality and Virtual Reality – The Year In Review. And for a look ahead, check out the 5 top Virtual Reality and Augmented Reality technology trends for 2017.
Sell more in less space with a stroll down the “endless aisle”
Retail is in trouble. After decades of expansion, traditional brick and mortar businesses are shuttering locations and reducing their physical footprint. According to a recent Fortune story, more than 700 department stores have closed since 2013. This includes big names like Macy’s, Kohl’s, J.C. Penney and Sears. This decline is not limited to mall stores.
“The most recent earnings season showed top department stores, staples of American shopping for more than a century, are having a hard time holding their own against the likes of Amazon.com. And analysts expect those problems to persist,” explains writer Phil Whaba in Fortune. How bad is it? “In April, leading real estate analysis firm Green Street Advisors said the top department stores would need to close some 800 stores for sales-per-square-foot to get back to 2006 levels.”
The solution: Just close a whole bunch of stores, right?
Not so fast. As J.C. Penney CEO Marvin Ellison explained to Fortune, stores play a crucial role in his company’s e-commerce growth, allowing them to not only compete with Amazon but also serve as additional distribution centers and pick-up spots for online orders.
This paradox — an expansive retail footprint is a drag on profits, but closing stores hurts online sales — is driving major retailers to adopt new mixed commerce solutions in an effort to retain existing customers and create new ones. Mixed commerce combines the best parts of the brick and mortar location with new technology and different ways of thinking about the shopping experience. Moving to a mixed commerce solution begins with a paring back of the size of retail locations, chopping a store that may have been 40,000-plus square feet down to 20,000 square feet (or much less), then embracing a mix of smart thinking and new technology to create a shopping experience that blurs the lines between shopping and entertainment.
Moving forward, emerging technologies like Augmented Reality (AR) and Virtual Reality (VR) will play a critical role in mixed commerce solutions. Not only do AR and VR offer a unique and valuable experience for consumers, they also open up what’s known as the “endless aisle” — a full catalog of 3D products that a shopper can interact with digitally, and which can be quickly shipped to a buyer’s home, often arriving that same day. This value extends beyond the scaled down locations, as regular patrons can download AR and VR apps for home use and experience endless aisle shopping from their couch.
These smaller-footprint locations can be placed in spots big retailers have traditionally had a hard time penetrating: Dense urban environments and high-traffic areas like airports and sports stadiums. There’s less room for inventory with a smaller footprint, and brands have been getting creative with ways to continue to offer the same amount of merchandise to consumers without having to maintain all that physical stock in a back room somewhere.
This future of retail is already here
There are dozens of companies testing out mixed commerce retail concepts. Here are four big names we’re sure you’ll recognize that are looking to embrace the future of retail:
A typical Target store is about 116,000 square feet, while a SuperTarget can top out out at whopping 177,000 square feet. That’s a lot of space to maintain! TargetExpress, on the other hand, will be a mere 20,000 square feet. This small footprint concept will allow Target to open stores in strip malls and along city streets, where a large footprint is an obvious non-starter. Target will then use technology to deal with the lack of inventory, digitally connecting shoppers to their supply chain, and allowing then to select from the full range of Target’s inventory in-store and online.
For example, a unique solution Target is experimenting with is the “In a Snap” app, which enables shoppers to scan any print advertisement and get immediate access to the items displayed on the page. TargetExpress will mix posters full of items with physical merchandise around the store, greatly expanding the number of product offerings while not impacting available square footage.
2. Toys R’ Us
Toys R’ Us is another major retailer looking to completely revamp their in-store experience. CEO Dave Brandon wants to turn the aging toy store into a destination for kids and their parents. According to a profile in Bloomberg, Brandon’s plan is already under way in the run-up to the holiday season, which is when the retailer generates 40 percent of its revenue and all its operating income. “Whether it’s letting shoppers fly drones or take target practice with a Nerf blaster, all the changes Toys “R” Us is implementing or considering recall an era when retail was more theater than science. Apple is doing it well today, and Brandon says Toys “R” Us can do the same,” the story says.
What are some of Toys R’ Us’ mixed commerce solutions? First, the company will be testing stores with footprints a quarter of the size of their typical 40,000 square feet, which can be strategically placed in different locations. “The company is also testing video screens, sound effects and colorful motion-sensor lights, and unboxing more toys in play areas. It’s also hosting more events, such as Pokemon trading and birthday celebrations,” Bloomberg reports. “‘I want kids to come in here and not know where to go next because there are so many things going on,’ says Brandon, who has seven young grandchildren.”
3. Circuit City
Remember Circuit City? The discount electronics chain went belly-up back in 2009, but it will soon reemerge as a reimagined (and yes, much smaller) shopping experience. According to a report in Twice, “the stores will range from 2,000 to 4,000 square feet, and will feature product zones that present the assortment by category and brand. Targeted directly at millennials, the mix will include pre- and post-paid smartphones, as well as tablets, notebooks, wearables, networking equipment, gaming products, headphones, drones, 3D printers, health appliances, and DIY devices, all supplemented by a service desk, electronic price tags and touchscreen terminals that link customers with what is envisioned as a million-SKU selection online.” That’s a textbook example of the endless aisle in action.
A typical DSW store is 20,000 square feet, but the company recently opened multiple 8,000-12,000 square feet. This allows DSW to open a higher number of stores at a lower cost and less inventory. DSW typically inventories 25,000 pairs of shoes at each location, and needed to quickly optimize their shoe inventory. Using technology to forecast size optimization, DSW can more accurately inventory the shoes they need for this smaller format space.
And if the retailer gets its way, you may soon be trying on shoes virtually and having them delivered to your home same-day. After all, if you’re going to take a walk on the endless aisle, you better have the right shoes.
For more information on how retailers are using mixed commerce solutions, check out our Mixed Commerce Glossary, which defines the terminology being used to businesses to describe the changes currently sweeping retail.